Abu Dhabi apartment prices rise 21% during 2014ARTICLEPHOTOSBy Staff writerFriday, 23 January 2015 9:30 AMAbu Dhabi apartment prices rose on average by more than 21 percent over the past year, according to a report by the real estate consultancy arm of Abu Dhabi Islamic Bank.

In its report, MPM Properties said government initiatives to stimulate job growth and enhance market sentiment, fuelled in part by a knock on effect from the Expo 2020 win, provided healthy demand across all real estate classes in 2014.

MPM Properties research showed capital value growth ranging from 11 percent to 35 percent across the emirate with an average increase of 21.6 percent.It said villa values also experienced strong growth ranging from 5-30 percent, with an average increase of 15 percent.

"The Abu Dhabi market continues to be dominated by individual investors, with sale prices increasing faster than rents, eroding yields which have dampened investor demand. This trend will continue until sellers agree lower prices or rents rise to help investors achieve net yields within a range of 5.5-6 percent," the report said.

MPM added that the Abu Dhabi residential leasing market saw significant activity during 2014 following the removal of the rent cap in November 2013.

"Despite concerns of potentially huge rental increases, MPM Properties data showed that the market is self-regulating with normal market forces of supply and demand allowing rental rates to be negotiated and fixed. This is healthy for the long term growth of the sector," the report noted.

Most third-quarter 2015 reports are saying that only 2 to 3 per cent will be added to the total housing stock per year over the next two to three years.

Demand for units in Abu Dhabi, at least on the leasing side, has remained strong, as according to most reports rents went up by 5 to 7 per cent last year. This rise was mostly because of the low supply coupled with an increasing population. Population predictions in such a fluid, immigrant-based economy are hard to come by, but according to the Statistics Centre Abu Dhabi, the average annual population growth rate between 2005 and 2014 was 7.6 per cent. If this holds, then population will continue to outstrip housing supply and rents will continue to rise – simply put, demand is greater than supply.

But what of the oil price slump? Will this affect population statistics? According to Monster.com, it seems it has not yet. Companies are still hiring even in the middle of what would seem like reduced sentiment in the region. Abu Dhabi’s population is closely linked to government spending and jobs, so people will be looking closely at the emirate’s budget for this year. The federal budget was cut by a modest 1.1 per cent for the coming year, and Dubai’s budget was increased by a whopping 12 per cent. The IMF said it expects the UAE economy to grow by 3 per cent this year, so outlook is reasonably positive. Rents should increase at an inflation level of 4 to 5 per cent this year.

The number 1 property portal in the UAE, Bayut.com, has confirmed exclusively to Al Arabiya English that the UAE estate market has witnessed a balancing act in the first half of 2017; despite both sale and rental prices in Dubai and Abu Dhabi having experienced a small dip, the market still represents a rich ground for investors looking for strong returns.

The CEO of Bayut.com, Haider Ali Khan, stated that: “We at Bayut have always been data focused and our aim is to be at the forefront of assessing the market trends based on the properties being listed by the real estate brokerage community.” Khan followed that with: “Over the past years, the market has gradually matured, and as this progression has taken place, investors need more credible information regarding the housing market, and we are working diligently in doing our part by presenting the information.”

The report reveals that the most popular communities in Dubai for rent in H1 2017 were Dubai Marina, Dubai Silicon Oasis, and Jumeirah Village Circle. In Abu Dhabi, the most sought-after areas for rent were Al Reem Island, Khalifa City, and Mohamed Bin Zayed City.

The most searched areas in both emirates, for buying property in H1 2017 were the traditionally in-demand areas, such as Dubai Marina, Downtown Dubai, and Al Reem Island, but also smaller family-friendly suburban areas like Arabian Ranches and Jumeirah Village Circle.

Bayut.com’s H1 report focuses on the performance of Dubai and Abu Dhabi in both sales and rent categories.

DubaiCompared to H2 2016, average rents have dropped by 10.4%, and average property sale prices have declined by 7%. The decrease from both sides of the real estate market indicates that the average return on investment (ROI) has remained stable (4.7%) while the market itself has become increasingly accessible for buyers.

Renting in Dubai

The report from Bayut.com states that by the end of H1 2017 the average rent prices in Dubai have decreased across all property types. For example, the average rent for a 3-bed villa has dropped by 7.6% while the average rent for a 1-bed apartment has declined by 6.1%. The only stable property type in Dubai’s rental market throughout H1 were studio apartments which saw a nearly imperceptible dip of 0.1%.

Buying in Dubai

The average property prices in H1 2017 marked a 7% decrease compared to H2 2016. However, as both the rental and sales markets are exhibiting a downward trend, the average ROI in Dubai has remained relatively consistent at 4.7%, compared to 4.9% at the end of 2016.

The most popular areas to buy in Dubai have had a downward price adjustment. While average property prices in Downtown Dubai have decreased by 6.6%, Dubai Silicon Oasis has seen a decline 4.9%.

Abu DhabiThe market report for Abu Dhabi H1 2017 has experienced a similar trend to that of Dubai as both rent and property price averages have experienced a decline. The data Bayut.com has gathered is in line with the overall market predictions and trends that anticipated a price fall in Abu Dhabi in 2017.

Renting in Abu Dhabi

Compared to the last half of 2016, average rent prices in the capital have decreased by 6.3% in H1 2017, across all property types. Studio apartment average rents dipped 4.3%, from AED 51,184 at the end of 2016 to AED 48,483 now. Similarly, rents for Abu Dhabi villas adjusted downward. For example, renting a 4-bedroom villa became 7.7% cheaper on average.

More specifically, decreases were marked on average rents in Al Muroor (10.7%) and Mohammed Bin Zayed City (16.2%) and other popular areas. However, renters in Khalifa City should note this area is not on trend; average rents in Khalifa City have increased by 3.4% in H1 2017.

Buying in Abu Dhabi

Bayut.com states that the average property prices in Abu Dhabi have also decreased with declines limited to lower single digit percentages, however, studio apartments in Abu Dhabi have not been subject to the same fall in prices as its larger counterparts (average studio property prices have increased by 2.2%).

Despite a drop in prices, the average ROI in Abu Dhabi still stays strong (5% on average).

H2 2017 forecastDespite a decline in property prices, the decrease in rental prices has kept the ROI consistently stable. Thus, it is currently more accessible for buyers to invest in both Dubai and Abu Dhabi than ever before.

Finally, Bayut.com’s report agrees with the predictions of most industry experts that we should expect a rise in both property prices and rents over the ensuing years due to the continued investment in infrastructure, diversification of the economy, and the Expo 2020 being around the corner.

Dubai’s skyscraper’s rents are on average $44 per square foot placing the emirate in 18th place in Knight Frank’s ranking contained in its Global Cities Report this week.

The report, which examines the rental performance of commercial buildings over 30 storeys, shows that Hong Kong’s skyscrapers continue to command the highest rents in the world at $304 per sq ft, followed by New York and Tokyo at $162 per sq ft and $140 per sq ft, respectively.

San Francisco, where rents have risen to $117 per sq ft, completes the top five, ahead of London which registers at $110 per sq ft.

Meanwhile, Toronto’s skyscrapers are experiencing the highest rental growth, rising 11.9 percent in the first half of the year to $58 per sq ft, Knight Frank’s analysis shows.